THE peso started the week stronger against the US dollar, recovering after the holiday break while the stock market retreated as late-session selling wiped out the benchmark index’s early gains.
The local currency closed at P63.47 to the dollar following a day of no trading in observance of All Souls’ Day. This was 27 centavos stronger than its Friday close of P63.74:$1.
It opened at P63.5:$1 and ranged from P63.445 to P63.55. Volume reached $1.041 billion.
Rizal Commercial Banking Corp. chief economist Michael Ricafort said the sharp decline in global crude oil prices has provided some relief to the local currency.
Ricafort said Brent crude oil price declined to $106 levels, sharply lower vs. the $118 posted on Oct. 30, last Friday.
The currency has strengthened by 70 centavos since its weakest close of P64.17 on Oct. 27.
Unusual volatility
Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona Jr. told reporters on Tuesday that they intervene during periods of unusual volatility.
“We go in and out,” Remolona said.
“If the depreciation increases too much, we don’t like it. It affects the inflation,” Remolona added.
Reyes Tacandong & Co. senior adviser Jonathan Ravelas expects the dollar-peso exchange rate to trade within the P63.30 to P63.70 range, supported by a weaker US dollar ahead of the US midterm elections and lower oil prices.
MUFG also said that the central bank’s tighter policy should help slow the pace of depreciation.
“We expect the BSP to remain hawkish and deliver at least one additional rate hike, helping to provide some support for the peso,” MUFG said.
The BSP policymaking body Monetary Board has raised key policy rates by 50 basis points to 5.5 percent.
MUFG said the peso could remain above P63:$1, ending this year at P63.8 against the greenback and further appreciate to P63:$1 level next year.
“Near-term risks remain skewed toward peso weakness, given the Philippines’ sensitivity to elevated oil prices and still-high US yields,” it said.
Intraday low
The Philippine Stock Exchange index (PSEi) fell 56.39 points, or 0.99 percent, to close at 5,624.17, its intraday low. The broader All Shares index likewise declined 0.58 percent.
Selling pressure was particularly evident in International Container Terminal Services Inc. (ICT), which dropped 3.28 percent, making it the day’s worst-performing PSEi stock. The decline also weighed on the services sector, which posted the steepest sectoral loss at 2.71 percent.
Four of the five other sectoral indices ended in negative territory, led by mining and oil, which fell 1.51 percent, followed by industrials, down 0.87 percent, and property, which slipped 0.30 percent. Financials edged down 0.02 percent, while holding firms gained 0.22 percent.
San Miguel Corp. led index gainers, advancing 1.62 percent, followed by Semirara Mining and Power Corp., up 1.12 percent, and SM Investments Corp., which rose 1.11 percent.
Trading remained subdued, with net value turnover reaching P4.89 billion, while foreign investors recorded net selling of P258.78 million.
Japhet Tantiangco, research manager at Philstocks Financial Inc., attributed the cautious trading to expectations of faster inflation in October compared with September’s 7.2 percent.
“The rise in global oil prices following the US’ alleged strike on Iran’s Qeshm Island also weighed on today’s trading,” he said.
AB Capital Securities Inc. said the market gave back its early gains as late selling, particularly in ICT, pulled the PSEi down to its session low.
The brokerage noted that the weakness tracked declines across regional markets as investors remained cautious ahead of the results of the US midterm elections.
On the domestic front, investors were also positioning ahead of Thursday’s October inflation report, with market consensus pointing to a 7.6-percent annual rate, potentially the highest this year.
Despite the stock market’s weakness, the peso continued to strengthen, closing at P63.52 against the US dollar, according to AB Capital. The currency gained 0.16 percent from its previous close and stood about 1.04-percent stronger than its record low.
AB Capital said the market remained vulnerable amid subdued trading activity, particularly among local investors, identifying the 5,580 level as a major support that could test underlying demand.
The brokerage said the next catalysts for the market would include third-quarter corporate earnings, the October inflation print and gross domestic product data, which could determine whether buyers return.
